CD Reform, What Now?

Negotiations collapsed last week over proposed statewide construction defect legislation. The future of construction defect (CD) reform remains to be seen. What’s clearly evident is that many cities and local municipalities are not afraid to take matters into their own hands. But how effective are local ordinances?

In a recent decision, City of Fort Collins v. Colorado Oil and Gas Association, the Colorado Supreme Court affirmed that state law prevails over conflicting local laws in matters of mixed state and local concern. Relative to CD reform, it’s obvious the state has a significant interest in regulating CD matters at the state level. Additionally to the state statutory scheme already in place, legislation has been introduced each year for the past three years. They propose changes to Colorado construction defects statutes to make it more difficult to sue developers and homebuilders.

The Supreme Court case illustrates that so-called “home-rule” cities that enact ordinances imposing additional restrictions on the rights of HOAs and homeowners to sue for construction defects under state law may be at risk if such ordinances are challenged. Whether these types of ordinances are valid or enforceable likely depends on whether the local regulations conflict with existing provisions. These regulations would conflict with the Colorado Construction Defect Action Reform Act. If the local ordinances are determined to conflict with the state law on matters of state concern or mixed state and local concern, the courts may determine that these types of local ordinances are preempted by state law. They are, therefore, invalid and beyond the scope of authority of home-rule cities.